The market for wooden decorations in Germany
Market characteristics - The main trends for wooden decorations are driven by generic trends in home decorations. Opportunities for DC exporters can be found in the field of low-cost products supplied in large quantities. Though cheap and mass-produced, the products should resemble Western design standards in order to be successful. Opportunities can also be found in niche markets where the high-design products are promising.
Consumption - The German market for wooden decorations represented 17.1% of the total EU market or € 151 million in 2009. Germany was one of the big markets in terms of consumption. The market saw growth in the period 2005 – 2008, more recently supported by TV channels for home improvements, massive advertising of home decoration products and the general inclination of the Germans to want to create a comfortable atmosphere in their homes. However, since the beginning of the financial crisis, Germans’ purchasing power has been decreasing gradually and they also started postponing most of their nonessential items’ purchases in 2009.
On the other hand, the likely future development of the housing market tells a lot about home decoration (woodware) growth and Germany is one of the most promising countries, according to this criterion. Moreover, according to an October 2010 survey, Germany is also one of the countries with the most optimistic consumers. The consumer confidence indicator measures the level of optimism that consumers have about the future performance of the economy.
Production - German production of wooden decorations represented 9.6% of the total EU production or € 55 million in 2009. Germany was one of the big EU producers. German production decreased by 7% per annum for the period 2005 – 2009. However, full recovery is not forecast in the coming years.
Trade - German imports of wooden decorations represented 22.4% of total EU imports or € 145 million in 2009. Germany was the biggest EU importer of wooden decorations. German imports increased by 1% per annum in the period 2005 – 2009 and imports from DCs increased by 5.5% per year for the same period. The DC share of total imports into Germany in 2009 was 60%, compared to 50.3% in 2005. The main DC suppliers to Germany in 2009 were: China (49%), Indonesia (3.1%), Thailand (2.8%), Vietnam (2%) and India (1.6%).
Indonesia saw its share decrease by 0.4% in total for the period 2005 – 2009. Brazil’s and Turkey’s imports also saw decreases, of 0.1% each in total for the same period. China was the biggest DC winner in terms of share; it increased its share of total German imports by almost 9.1%.
Please use this consumption data with great caution as it is apparent consumption (Imports + Production - Exports).The market for wooden decorations in Germany.
Trends - For opportunities for and threats to wooden decorations we refer to the module Trends and segments for woodware.
The following country-specific trends should be considered:
•There are considerable geographical differences in Germany. Eastern Germany (former DDR) is poorer than West Germany, the average wage being only 71% of the West German average wage and unemployment is higher. This results in buying habits based on a preference for basic, functional, mass-produced and inexpensive home accessories available from large, one-stop-shopping venues. One exception is Berlin where, despite unevenly distributed income, there are segments in which consumers are trend-followers and even trend-setters.
•The Turkish are the biggest minority group in Germany. They tend to have less spending power than native Germans and their unemployment rate is high. For this reason, they tend to buy cheap home decorations and accessories. Furthermore, most Turks are still inspired by their home country when it comes to home decoration, so they buy home accessories with more than average decoration. Most Turks live in West German cities or in Berlin.
•Cocooning in Germany is popular. It stimulates the sales of home decorations and accessories, because people want to make their homes comfortable and welcoming.
•Another trend that expresses itself through wood is the re-appreciation of craftsmanship and ancient skills. Wood lends itself perfectly to the display of techniques with a “wow” factor: amazing turning (e.g. baroque elements carved into wood) or hand-carved pieces (with the chisel marks still visible), often in oversized, statement pieces. The palette here is more subdued, neutral, with touches of gold, red or white added.
Price and price development - According to Euro stat, 2010, furniture and furnishings prices in Germany was 5% below the EU average. In terms of the general level of prices (all products included), the price index was above the EU average, meaning that the basket of standard products and services in Germany is more expensive than the EU average for the same. With regard to inflation, Table 1 below presents annual inflation rates both in the long and short term.
Table 1 Annual inflation rates (in %) for HICP Harmonized Indices of Consumer Prices (all-items index) and Furnishings and household equipment
Table 2 Retailer price variety per different EU market/country
• Legal requirements – always be sure you are well aware of all legal requirements applicable in your target country and within the EU. If you fail to comply with these, you are not allowed to do business in the EU.
• Non-legal requirements – as the market is becoming more differentiated, buyers` special requirements are increasing. Most of the big players have their own special conditions which you need to follow, if you want to be their partner. Those terms can
be related to many aspects of your product, such as (private) labelling, quality, packaging, marking, compliance with specific standards, etc.
More information regarding buyer requirements can be found in the module: Compliance with buyer requirements.
•The trend to reuse, refurbish, recycle is gaining importance. Due to Germany’s large population, lower price segments can also afford to adopt sustainable products (e.g. FSC wood), as the possible higher costs of production can be offset against higher volumes of sales.
• Fair Trade and sustainability: although price is still the most important purchase decision, environmental and social concerns are of growing importance. This is a niche on the German market which will develop further. There are Fair Trade organizations acting on the market which are helping in the promotion of such products.
•Caused by economic developments in their country, many German consumers on lower incomes will continue to seek low-priced home decorations. DC exporters have to compete on price, but not forget the great range of leading lifestyle brands in Germany. This makes the German consumer hard to please, which is a threat to producers in developing countries.
• Exporters in developing countries will be faced with increased demands for higher quality and environmentally and socially responsible products. This will demand a lot from the production process, which may have to adapt to meet all the demands of German consumers.
• Due to the lower incomes and decreased purchasing power, consumers are mostly looking for cheaper products, although some of them are reluctant to compromise on the quality.
• A growing category in the wooden decoration market is products which combine ethnic elements and contemporary design.
•Consumers are avoiding cheaply designed products and look for more unique articles. The market for wooden decorations in Germany.